Prorated Payment

A prorated payment in lending refers to a partial loan payment calculated based on the number of days in a given period. This method ensures borrowers pay interest only for the exact time they’ve used the funds. Prorated payments are common when loan disbursement or repayment doesn’t align with standard payment cycles. For instance, if a loan is issued mid-month, the first payment may be prorated to cover only the remaining days of that month. Similarly, when a loan is paid off early, the final payment is often prorated to account for the shorter period. This approach provides fairness and accuracy in interest calculations, benefiting both lenders and borrowers.